Lukoil, Russia’s second-largest crude producer, accepted an
output goal of 1.2 million barrels a day at the field it
operates in southern Iraq, down from the 1.8 million barrels a
day it initially sought to produce, Abdul Mahdy Al-Ameedi,
director general of the Oil Ministry’s licensing department,
said today in a telephone interview in Baghdad.

The ministry is in discussions with Exxon, Shell and Eni
about reducing targets at the West Qurna-1, Majnoon and Zubair
fields where each holds respective rights, Al-Ameedi said. “We
are in talks to decrease output, but until now we didn’t reach
an agreement on final numbers,” he said.

Iraq has sought foreign investment to help rebuild its
energy industry after the U.S.-led invasion of 2003 ousted the
regime of Saddam Hussein. The country holds the world’s fifth-
largest crude reserves, according to BP Plc (BP/), and is the biggest
producer, after Saudi Arabia, in the Organization of Petroleum
Exporting Countries.

‘Production Plateau’

Iraq initially set a long-term goal of pumping 12 million
barrels a day. Political tensions and violence have slowed its
recovery, and the government has since decreased its overall
target to levels ranging from 6 million to 10 million barrels a
day. Its efforts to cut targets at individual fields are related
to infrastructure issues and the nationwide reduction in planned
output, Grigory Volchek, a Lukoil spokesman, said Dec. 27.

Al-Ameedi said the Oil Ministry extended Lukoil’s licensing
period by five years, to 25 years, and lengthened the company’s
“production plateau” to 19.5 years from 13 years, under an
agreement the two sides signed today in the Iraqi capital.

“The modified provisions of the project provide for
realization of Lukoil’s production and economic targets, while
the risks emerging in the course of implementation of the
project are considerably reduced,” Lukoil’s billionaire Chief
Executive Officer Vagit Alekperov said in a statement today.

Al-Ameedi said Lukoil, based in Moscow, holds 75 percent of
West Qurna-2 after Statoil (STL) SA withdrew last year, with Iraq’s
government retaining the rest.

Lukoil continues to search for a replacement for Statoil
and sees China as an “attractive partner,” Alekperov said Jan.
15. West Qurna-2 is on track to start producing early next year,
Mahmud Abdulamir Hashem al-Luaibi, deputy director general of
Iraq’s state-owned South Oil Co., said by phone today from the
southern city of Basra.

BP Plc has expressed interest in developing Iraq’s oldest
oil field at Kirkuk in the north and has been negotiating with
the government for about two years, Al-Ameedi said. No agreement
has been reached on Kirkuk, he said.